Guide to Investors – The Different Types of Fixed Deposits Available in India

Safety has always been a consideration while investing. Investors need security on their capital and the assurance of returns. From this point of view, bank and NBFC Fixed Deposit schemes have always been attractive options as they are regulated by the rules laid down by the Reserve Bank of India.

Banks and NBFCs offer different types of FD schemes. There are also other options like Fixed Deposit plans offered by companies looking to raise capital for their operations.

These are offered for tenures ranging from 7 days to 10 years. The longer the tenure, the higher the interest earned. The rate of interest is unaffected by market fluctuations because it’s set at the time of creation of the FD.

Special Fixed Deposits

These funds are invested for specific time periods. If you leave the money untouched for the specified period, you will earn higher interest on it than the interest paid out for Standard FDs.

Tax Saver Fixed Deposits

These are long-term FDs. Generally, your investment is completely locked down for a period of five years. But, you still get the benefit of tax deduction through these FDs. The principal amount you invest in tax saver FDs are exempt from taxation, with an upper limit of Rs.1.5 lakhs per FD.

Regular Income Fixed Deposits

If you have limited income and depend on the interest from bank deposits for your monthly expenses, this type of FD is your best bet. You can choose to have the interest paid out either monthly or quarterly.

Cumulative Fixed Deposits

If you do need the interest amounts for regular expenses, you can opt to add the returns back to the FD, compounded either monthly or quarterly. The next interest cycle will include the added amount, earning you more on your investment.

Flexi Fixed Deposits

These are FDs linked to your savings account. You can create an FD with an initial deposit and link it to your savings account. You can also set a cap on your savings account and any excess will be transferred to the FD.

Corporate and Other Fixed Deposits Offering High ROI

Some banks, post offices, and RBL banks offer higher rates of interest on FDs than regular schemes. These are generally for a minimum period of three years and the interest rate is slightly higher than the normal FD rates.

Corporate Fixed Deposit schemes offer higher returns on your investment, but you need to choose the company with care. Look at the credit ratings from reputed credit rating agencies like CRISIL. If you choose a good Company FD scheme, you will generally earn more on your investment than bank FDs as these schemes offer the highest interest rate on FD.